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Optimizing invoice handling for a law firm

If a law firm wants to generate an improved cash inflow through a faster invoicing process, a simple and standardized billing process needs to be created. The optimizations should lead to a reduction of invoicing peaks and to an even billing over the year. The aim is therefore to enable a monthly billing of services through optimized invoice handling processes and a reliable IT-system.

In order to support accurate and timely billing – which also saves administration time – the upstream and downstream processes must be included in the process redesign. The goal is to generate an improved cash flow through a faster invoicing process. Therefore, it is proposed to include invoicing assistants in the new invoicing process.

Upstream and downstream processes are:

  • Master data management,
  • Performance recording and
  • Dunning

The decision-making authority over the files to be invoiced remains with lawyers. The changes proposed lead to a faster billing of the services that have not yet been billed. Lawyers and administrative personnel should be assisted by invoicing assistants who are responsible for the following agendas:

  • Preparation of invoices,
  • Analysis of invoices
  • Support of lawyers and
  • Timemanagement invoicing

The new invoicing process introduces a new supporting process to unify the invoicing process in a law firm or law firm group.

Master data

Master data management is supplemented by two process steps:

  • when an order is placed, invoice-relevant data will be recorded asap and
  • the end of the project (the completion of the project) is recorded in the invoicing system asap.

This master data management improves the quality of the invoicing proposal lists that will be made available to lawyers by the invoicing assistants in the future. The additional data fields needed in the system include: cash expense allowance, invoicing specifications (partial billing), project end, flat-rate fee or hourly billing, etc.

Timesheets/Billable Services

Proper and timely recording of billable services supports billing quality and timeliness. The performance recording process itself does not necessarily change, although it should be emphasized that a continuous (weekly) recording of benefits is necessary to support fast invoicing. Late-registered benefits or post-recorded benefits are delaying the invoicing process.

In addition, it is recommended to standardize the performance abbreviations (the performance codes) and the associated text, thus creating uniform service categories. However, the text suggestions associated with the performance code should be overridable.

Billing/Invoicing

Each billing assistant is assigned to teams of lawyers for which the assistant is responsible. The team assignment is based on professional and local proximity. At least one invoicing assistant should be appointed per location. The supervised legal teams are presented with monthly invoiced files by the invoicing assistants. Invoiceable files are those that:

  • include a completed project, or
  • those for which the last time recording recording was more than four/two weeks ago, or
  • invoicing volume is more than a certain threshold e.g. EUR/USD 10.000

The invoicing decision remains with the lawyer in this invoice handling process. Invoicing assistants are responsible for the invoicing administration (e-billing or paperbased billing). The invoicing assistants remain assigned disciplinarily to their line managers, but in addition, a “dotted line” to Head of Finance should be established for coordination reasons.

Dunning process

The invoicing assistants submit a list of open posts to lawyers on a monthly basis. The open item list (OP list) contains all invoices that are older than 30 days and are still unpaid.

The lawyer may decide whether

  1. the client is or is not reminded in principle or
  2. which level of reminder is being sent

The following reminder levels are possible:

  • Payment reminder (per Mail)
  • 1st dunning notice
  • 2nd dunning notice
  • 3rd dunning notice (threat of legal action – or debt collection agency)
  • Final dunning notice: Lawsuit (either by friendly law firm or own team)

The dispatch of dunning letters is carried out by the invoicing assistants. The payment terms of the invoices should be standardized.

Job Profiles for invoicing assistants

Invoicing assistants tasks:

  • Analysis of services not billed
  • Creation of invoicing proposals
  • Supporting the dunning process
  • Operational support for the supervised teams
  • The invoicing authority remains with the lawyer; the service level is significantly increased.
  • Additional tasks may be added that are linked to the new invoicing process

Conclusio

A unified and standardized invoice handling process improves the cash generation of a law firm. Several optimizations (e.g. invoicing assistants, unified performance codes, optimized dunning processes, etc) lead to a reduction of open invoices and have a positive effect on the working capital of the law firm. As the final decision of invoicing often still lies at the lawyer, it is important that long overdues are challenged and monitored. Contact us if you want to improve the billing cycle of your company.

By Georg Tichy

Georg Tichy is a management consultant in Europe, focusing on top-management consultancy, projectmanagement, corporate reporting and fundingsupport. Dr. Georg Tichy is also trainer, lecturer at university and advisor on current economic issues.

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